World Business

Dubai Holding unit posts $6.2b loss in new hit

(Agencies)
Updated: 2010-06-01 18:04

DUBAI: Dubai Holding's main unit posted a $6.2 billion loss for 2009 and said it may resort to asset sales, sending shares in Dubai sharply lower, in the latest setback to the emirate's troubled finances.

Dubai Holding Commercial Operations Group (DHCOG) said it was in talks with banks to roll over debt and had access to emergency funding if needed as it renegotiated obligations to trade creditors after the property crash put its cash flow under severe pressure.

The loss increases challenges faced by Dubai Holding to meet its obligations, estimated at $14.8 billion out of a total $109 billion owed by the government of Dubai and its related entities.

The news sent Dubai's main index down 3 percent with property stocks weakening on anticipation that DHCOG will need to sell more property units, possibly flooding the market, to pay down debt. Banks fell on renewed balance sheet concerns.

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"It is sure to have knock-on impacts on the entire economy. The banks will be seriously challenged to lend, so it's all again part of a vicious cycle," said UBS analyst Saud Masud.

"It will definitely have knock-on impact on banks. Their books will have to be revalued to make adjustments to the write off," he said. "The concerns in real estate markets are far from over."

DHCOG is a unit of Dubai Holding, the conglomerate owned by the emirate's ruler that belongs to the matrix of firms commonly known as Dubai Inc, which was badly battered by the financial crisis and remains in negotiations with creditors.

Concerns about the overall debt burden of Dubai's state-linked companies mounted after Dubai announced a standstill on repaying $26 billion in debt as it restructured conglomerate Dubai World. It unveiled a $9.5 billion rescue plan for the firm in March.